When Ally Financial’s mortgage unit Residential Capital filed for bankruptcy last week, I had an inkling it would spell trouble for the foreclosure fraud settlement the parent company signed with state and federal regulators. How would individuals get loan modifications in the midst of a bankruptcy proceeding?

Sure enough, the New York Post, which actually has somewhat decent housing coverage on occasion (and often more timely coverage than the “paper of record” New York Times), reports that this bankruptcy has already become a strain on families:

Two weeks ago, a Westchester family had finally reached the end of seven years in foreclosure hell.

Then the plate tectonics of the massive bank that controls their fate shifted. Ally Financial, formerly GMAC, filed Chapter 11 bankruptcy for its troubled Residential Capital mortgage unit last Monday. Ally owes taxpayers roughly $12 billion in bailout money and is majority-owned by Uncle Sam.

Unemployment caused the Westchester family to miss mortgage payments and seek Chapter 13 bankruptcy protection. Now they are in limbo, awaiting approval by the ResCap Chapter 11 judge.

“Resolution is on hold,” said the family’s lawyer, Linda Tirelli, who could not disclose more details because the deal is still pending. “GMAC has sought bankruptcy protection like many of its customers have.”

There are 2.4 million ResCap mortgages nationwide, with a significant amount eligible for the settlement by virtue of being underwater and/or delinquent. I have to suspect that most or all of those cases will simply be put on hold now, for no other reason than Ally has the ability to make that happen.

And of course, the only actions Ally, formerly GMAC, will allow to move forward are the foreclosure actions. So if you’re fighting a foreclosure, that fight goes on. If you were working on a loan modification, or trying to get a principal reduction through the foreclosure settlement, you’ll have to go back to the beginning once the servicer rights are sold, probably to Nationstar, a division of the investment management group Fortress.

Ally maintained that the bankruptcy will have no bearing on any loan modification or settlement work. I can’t see how that’s true.

This is just another of the time bombs that accompany the discretionary housing policies of the Obama Administration. Because of this, banks can simply made snap decisions that impact their customers negatively without any sanction or explanation. Another example: Fifth Third Bank just up and decided not to participate in HARP 2.0, meaning that any current underwater borrower with one of their mortgages is most likely out of luck on negotiating an interest rate reduction.

With a few sentences Fifth Third Bank (affectionately known as 1  2/3 Bank) dropped the number of investors offering HARP 2 by one: “Effective May 14, 2012 on all new loans registered, the LTV for DU Refi Plus and Hasp Open Access has been changed to a maximum of 105%, CLTV and HCLTV remain unlimited. For non-Fifth Third to Fifth Third loans, transferred mortgage insurance will no longer be allowed.”

Oh well! Hope that’s not a problem for anyone.